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Venezuela

Crude prices have been surging the last few weeks with the expected loss of Iranian supply beginning November 4th. With that, the U.S. has been ramping up pressure on OPEC to increase production in an attempt to lower oil prices.

The bad news flowing out of Venezuela this year rivals even that of the mighty surges of the Orinoco River as news came out over the weekend of an assassination attempt against Venezuelan President Nicolás Maduro.During a televised speech to soldiers, a drone carrying explosives detonated in the skies of Caracas, forcing President Maduro and his retinue to flee for safety.Although he escaped without injury to his person, his reputation and government took a considerable hit.This latest attempt comes amidst widespread economic collapse and cataclysmic inflation levels.

Thursday marked the largest drop in the oil market since May 8th based on OPEC’s most recent rhetoric. After the United States had withdrew from the Iranian Nuclear Deal everyone has seen prices go up at the pumps and the volatility in the market is as prevalent as ever. So what has finally stalled this rallying market? The answer is OPEC, primarily Russia and the Saudi’s, have begun putting it out there that they are considering increasing production to compensate for Iranian and Venezuelan crude potentially leaving the mainstream market. The current stance the U.S. is taking though seems to point at applying severe sanctions on both oil producers within the not so distant future.

Headlines continue to roil the oil markets and map out a most certain volatile summer for prices.

The potential of further crude supply disruptions in Venezuela and Iran have pushed prices to 3 ½ year highs.

Reports that the US could impose even tougher sanctions on Iran and possibly new sanctions on Venezuela.

In a speech before the Heritage Foundation Monday, US Secretary of State Mike Pompeo said the Trump administration would impose "unprecedented financial pressure in the form of the strongest sanctions in history" unless the Islamic Republic renounced all its nuclear activities, its ballistic missile program, and its support of regional proxies.

Recent reports from industry watchdog International Energy Agency (IEA) highlighted a steep drop in Venezuela's crude production, with output at the lowest point in decades outside of production loss during the 2002-2003 strike. OPEC, citing secondary sources, reported Venezuela's crude production averaged 1.436 million bpd in April, down 531,000 bpd or 27% against year prior.

Amid the geopolitical headlines, last week's supply data from the Energy Information Administration showed distillate stocks as of May 11th were at 114.9 million barrels, a sizable 31.9 million bbl less than the equivalent period in 2017. Gasoline inventories stood at 232 million bbl, 8.7 million less on the year, while crude oil stocks at 432.4 million bbl for the week reported were off 1.4 million bbl on the week, though down a substantial 88.4 million bbl versus the same period in 2017.

As for further evidence of stout demand, EIA reported total products supplied to markets, or implied demand, rose 4.5% or 882,000 bpd from the equivalent week in 2017 to 20.536 million bpd versus 19.654 million bpd in 2017. Increased demand coincides with a reduction in net imports of crude and petroleum products by 41.9%, or 2.08 million bpd from the equivalent period in 2017.

This is bad news for local distributors who just came through RVP change to summer grade gasolines. Typically, this is a time when margins get squeezed in April and recover in May. With the run up in wholesale prices the last two weeks they are getting squeezed yet again.

Retail prices in all Pennsylvania markets outside of Pittsburgh should be over $3.00 per gallon for 87 grade gasoline. But they sit at $2.999. None want to blink first and break that psychological price level.

The chart says gasoline is overbought. While hope is not a strategy, our fingers are crossed for some pull back prior to the holiday weekend for some needed relief.

Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.

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